September 2011 Issue

Sri Lanka’s First Islamic Bank Launched

Sri Lanka’s first fully fledged Islamic bank, Amana Bank, was officially opened for business this month (August). The bank, which received its license earlier in 2011, is capitalized at US$31 million, well above the minimum required regulatory capital of US$22 million. The potential market size for Islamic banking in the country is about US$1.5 billion. Amana Bank is backed by Malaysia’s Bank Islam, which owns 20% of the bank. Other investors in Amana include AB Bank of Bangladesh, which holds 15% and the IDB, which has a 10% stake.

Recent Developments of Islamic Finance in India

Islamic Finance News, Malaysia

Since the launch of Shariah-specific indices on the leading stock exchanges in India, fund managers have been evaluating the launch of new schemes and strategies to further explore the Shariah finance model within the Indian capital markets. On this front, an Indian asset management company recently launched its open-ended Shariah compliant portfolio management services (PMS) strategy with the aim of tapping Shariah compliant investment opportunities in the Indian stock market. The PMS strategy proposes to identify investment opportunities in Shariah compliant stocks. Further, the free cash is proposed to be invested in gold exchange traded funds.

Development of Islamic Leasing - A Way forward for China?

Islamic Finance News, Malaysia

Interestingly as China’s leasing industry grows, there are currently two parallel regimes governing foreign direct investment in the mainland Chinese finance leasing industry: financial leasing companies established in mainland China by the approval of the China Banking Regulatory Commission, pursuant to the Measures for the Administration of Lease Financing Companies; and foreign-invested finance leasing companies established in mainland China with the approval of the Ministry of Commerce. Both regimes demand high entry standards while being attractive propositions for financiers interested in exploiting the domestic Chinese market.

Global Trust Bank of Nigeria Eyes Shari'ah

Zawya, UAE

Healthy Profits for Malaysia's Islamic Sector

Zawya, UAE

Uganda's Growing Islamic Banking Sector

Global Islamic Finance Magazine, UK

It has been reported that The Global Trust Bank of Nigeria said it is considering introducing banking services in Uganda that comply with Shariah Law this was according to the Islamic Globe newspaper. Uganda's Central Bank authorized Islamic banking just months ago. The Islamic banking sector is attracting many foreign suitors with firms from Kenya, South Africa and Abu Dhabi all planning on setting up shop in the country, according to the Islamic Globe.

Sudan Central Banking Developments: Currencies and Governors

Bloomberg, USA

Since the break-up of Sudan into two separate countries (North Sudan, and South Sudan), there have been a series of developments in central banking in the two countries as the process of building new nations gets underway. The developments include the formation of a new central bank, the issuing of new currencies, and staffing changes.

Turkey’s Tempting Islamic Banking Sector

Islamic Finance News, Malaysia

Turkey has been one of the few economic success stories emerging from the recession, with the highest economic growth rate in the world (11%) in Q1 2011. Despite a dip in 2008 with GDP contracting 14.6%, the economy rapidly returned to growth and GDP grew by 8% in 2010 with a 5% expansion predicted for 2011. Turkish banks were largely unaffected by the global financial crisis, with limited exposure to toxic securities and high retail deposit levels providing a liquidity buffer. The regulator maintains firm control with a focus on preventing excessive credit growth and a ban on foreign currency retail lending, meaning that banks have experienced little funding stress. Fitch Ratings recently changed Turkey’s ‘BB+’ sovereign rating outlook from stable to positive suggesting that a future upgrade could be on the cards, which will only enhance Turkey’s attractiveness to foreign investors.

KPMG Selects Miller as Global Head of Islamic Finance

Global Islamic Finance Magazine, UK

KPMG has hired Neil Miller as global head of Islamic finance. Miller joins from Norton Rose where he led their global Islamic finance practice and will continue to be based in Dubai, where he has been since 2009. According to KPMG, ‘Neil has specialised in Islamic finance since he moved to Bahrain in 1995. He then returned to London in 2000 to set up Norton Rose’s Islamic finance group which went on to win numerous industry awards under his leadership, with Neil becoming a highly regarded industry figure internationally.

Gulf Takaful Sector Expected to Increase

Global Islamic Finance Magazine, UK

It has been reported that With the general consensus suggesting single-digit growth in premium income so far this year, to aim for a four-fold increase and more over the next four years might seem like taking on Mount Everest without oxygen support. But it is a 20 per cent CAGR (compounded annual growth rate) in premium income that is being projected for the GCC's insurance sector in the next four years by a new report, with the UAE and Saudi Arabia generating the bulk of the new business.

SATORP Pioneers Project Sukuk for Saudi Jubail Refinery

Zawya, UAE

It is as if Saudi corporates are queuing up to heed the advice of Muhammed Al-Jasser, governor of the Saudi Arabian Monetary Agency (SAMA) on the need for greater sukuk origination in the Kingdom given in a lecture at Oxford University earlier this year. "Sukuk," explained the governor, "have a very great potential in the Saudi and Gulf market. The Saudi market is moving from traditional sources of financing such as bank credit to corporate bond and sukuk. This is a development issue and has started to happen. The banks may not be able to meet local funding requirements from traditional sources given the rapid expansion of infrastructure and projects in the Saudi economy. But this also depends on demand and supply dynamics of the market. SAMA encourages banks and corporates to go down the sukuk route. We would like to see the local credit market diversified from bank finance to corporate bonds and sukuk."

CBO Fast Tracks Second Islamic Bank License

Zawya, UAE

From being off the Islamic banking radar earlier this year, Oman has now approved Islamic banking licenses for two banks, with a few more on the cards especially to one or two Islamic banking majors in the Gulf Cooperation Council (GCC) countries. The latest approval is the go-ahead given in late August to the promoters of Al-Izz International Bank to set up an Islamic bank instead of a conventional bank, for which approval was originally given by the Central Bank of Oman (CBO) in September last year.  

Al Hilal Lines Up $5bn Sukuk Program

Zawya,UAE

The Abu Dhabi government-owned Al Hilal Bank, has lined up a Sukuk program of between $2bn and $5bn according to various press reports. The bank will kick off the program, with a $500m five-year issue, according to a news agency. Local press has reported that the bank, which is fully owned by the Abu Dhabi Investment Council, is looking to issue at least $1bn Sukuk before the end of the year.

BNP Paribas Investment Partners Wins Prestigious Islamic Finance Award

Global Islamic Finance Magazine, UK

BNP Paribas Investment Partners was named the Best Islamic Asset Management Company in Europe in July at the inaugural Islamic Finance News awards entitled "Islamic Investor Poll 2011". Published weekly, Islamic Finance News is the industry's leading e-newsletter. BNP Paribas based in Malaysia is doing unprecedently well in exceeding expectations in the Islamic finance industry. BNP Paribas adheres to Shariah compliancy in all its products and services that it offers to customers.

Shariah-Compliant Repo — A Key Development

Arab News, Saudi Arabia

The execution last week "of the GCC's first ever Islamic equivalent of the conventional repo (repurchase contract) product" is potentially an important development in the Islamic finance industry especially for short-term liquidity management and bank reserve management by central banks. The National Bank of Abu Dhabi (NBAD) and Abu Dhabi Islamic Bank (ADIB) claim to have completed the first Shariah-compliant equivalent of a conventional repo based on a collateralized Murabaha transaction. A statement from NBAD stressed that the two banks concluded a one week maturity deal valued at $20 million against Malaysian and Abu Dhabi government-related entity sukuk. "NBAD and ADIB jointly embarked on this initiative to formalize the Master Collateralized Murabaha Agreement (MCMA), thus enabling Islamic banks to utilize their holdings of sukuk. The MCMA offers a Shariah-compliant alternative to the repurchase arrangement, which conventional banks and financial institutions (FIs) use to lend and borrow at extremely low risk," explained the statement.

Arbitration on the Increase in Islamic Finance

Arab News, Saudi Arabia

In the high court in London earlier this year a Muslim businessman brought a case against a fellow Muslim businessman concerning a dispute over the arbitration process relating to a contract between the two parties. The one businessman objected to his counterpart appointing a non-Muslim arbitrator stressing that under Islamic law the arbitrator must be Muslim. Normally arbitration involves an alternative dispute resolution to costly litigation. But in the above case, the dispute was over the arbitration process itself. Whether an arbitrator must be a Muslim in a case involving a Muslim business or say in the Islamic finance industry is a moot point. At the Kuala Lumpur Regional Centre for Arbitration (KLRCA), for instance, the general requirement for a case involving Islamic financial institutions, says Director Sundra Rajoo, "is that the prospective arbitrator has to either be an Islamic scholar with experience in arbitration or an Islamic Banking Law practitioner. The arbitrator need not be a Muslim and what we look for in an arbitrator is their qualification and their award writing skills."

ICS Financial Systems Promotes Islamic Finance Solutions

Global Islamic Finance Magazine, UK

ICS Financial Systems Ltd. - ICSFS, a leading company in the field of automation and computerization of banking systems, showcased its fully integrated banking solution software ICS BANKS ISLAMIC at the 2nd Annual Asia Islamic Banking Conference 2011, one of the series of Fleming Gulf’s Islamic Finance Conference in Asia, that was held in Kuala Lumpur, Malaysia from 4th - 5th July 2011, at Sheraton Imperial Hotel. The 2nd Annual Islamic Banking Conference main aim is to help Middle East banks to successfully expand in Asia, and to release the true potential of Islamic Finance in Indonesia, Pakistan, Bangladesh, Singapore, Japan, South Korea, and China. The conference focused on steering innovations in the dynamic Asia region and exploring new frontiers, and connecting IT decision-makers from the financial industry with Islamic solutions providers.

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